Eastern exchanges 'facing extinction'

STOCK markets in central and eastern Europe may die out unless they band together or ally themselves with major exchanges in the west, a new report says.

Next year, a host of smaller European nations will join the European Union. The London-based Centre for European Policy Research says that may bring wider economic benefits for the so-called EU accession countries, or EUACs. But local stock markets face their major companies drifting away to list on international bourses.

The two major exchanges in the regions, Poland and Hungary, have been stable and there has been growth in Slovenia and Slovakia. But the rest - covering Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania and Romania - remain small or have been losing listings. One route is for the exchanges to pursue regional alliances, such as those that have created Norex in Scandinavia or the Hex, covering the Baltic countries.

But mergers with their giant western European counterparts appear, as yet, unlikely, says the report commissioned by the Corporation of London. It said: 'Deutsche Boerse has for the most part sought to develop its strategy in isolation and, therefore, has not tried to enter into alliances with the smaller EUAC stock exchanges.'

The best chances for mergers could be with Euronext, which encapsulates the Paris, Amsterdam and Brussels bourses. If local exchanges decline, says the report, the ability of smaller local companies to raise capital and contribute to domestic economic growth will fall as well.